Before Arundhati Bhattacharya occupied the 18th floor corner room at the State Bank of India's Nariman Point headquarters in Mumbai two years ago, India's largest public sector bank had been reluctant to embrace social media. The SBI management had earlier singed its finger very badly with its Twitter debut, when scores of unsatisfied customers posted negative comments on its timeline, forcing it to beat a hasty retreat - perhaps it was not prepared, organisationally, to cope with the changing social media dynamics.

But, past failures did not deter the 57-year-old industry veteran. Immediately after taking office she decided to grab the social media bull by its horns to script a turnaround. By the end of the first three months, the Facebook page was up and running, the next two months saw SBI's YouTube page go live and, within one year, Bhattacharya was ready to take on the Twitteratti. There was no looking back since then. The number of followers has swelled to 3.24 lakh on Twitter and a staggering 39 lakh on Facebook. That's not all. Instagram, LinkedIn and Pinterest are also on SBI's social media menu, at a time when many banks are yet to open their accounts. A modest Bhattacharya, however, says the social media experiment was quite simple because she had been able to stitch together an efficient team of professionals who were well equipped to oversee the content and exercise oversight.

Now, SBI, which was often labelled as old-fashioned, has an aggressive social media strategy, providing Internet and mobile banking solutions with ease to cater to the Gen Y customers. Bhattacharya's social media initiatives convey a lot about her approach to banking and her eagerness to take the game away from both public and private banking peers. It is, at present, three times bigger than the next big player, ICICI Bank, in terms of assets.

Bhattacharya also worked hard to ensure that SBI's core banking apparatus remained well oiled to take on both internal and external challenges. She made it a point to chase bad borrowers, build safety walls, reduce costs, guide HR initiatives, focus on customer service to not only retain its existing customer base, but also make it more appealing to the new-age client. While many of her qualitative initiatives would yield results in the years to come, the bank has not lost focus on the present. Despite the deteriorating asset quality in a difficult economic environment, Bhattacharya has managed to pull off encouraging numbers. The bank's deposits grew by 13 per cent to Rs 15.76 lakh crore in 2014/15. SBI's assets increased by 14.24 per cent to Rs 20.48 lakh crore and profits jumped by 20 per cent to Rs 13,102 crore. The gross non-performing loans, which she inherited, have fallen from 4.95 per cent to 4.25 per cent. Many insiders credit Bhattacharya for making SBI future-ready, instead of harping on its legacy issues. That is a trait of a champion of champions. And, the views of the Business Today Best CEO 2015 jury were no different - unanimously adjudging her as India's Best CEO in the Super Large Companies category.

Ice Bucket Challenge

Given the size and legacy issues, Bhattacharya took the digitisation challenge head on. While a social media presence created a buzz, Bhattacharya set up half a dozen fully digital branches - probably a first in the world - equipped with state-of-the-art gadgets that encourage self-service practices. For instance, in 15 minutes a customer can now walk away with a personalised photo debit card by using the Aadhaar card. There are also cushy advisory rooms and business lounges. Business is already rolling in with 16,000 new accounts and close to Rs 200 crore transactions. Piyush Singh, Managing Director and India Lead, Accenture Financial Services, says Bhattacharya is one person who came with a very clear vision and conviction that digital banking was the future. "She is responding very fast to the needs of the digitally savvy customers and, at the same time, digitising the enterprise and processes at the back end," he says.

'Arundhati is not just catering to the digital banking needs of affl uent smartphone customers, but also thinking of the underprivileged through the Batua feature phone offering, which will be for the masses, says Piyush Singh, MD and India Lead, Accenture Financial Services. (Photo: Rachit Goswami)

SBI is expected to launch 250 more digital branches by March 2016. Though the numbers are like a drop in the ocean for a bank with 16,000-plus branches, Bhattacharya is excited about it. A quick learner, she is already tweaking the digital-branches model. "We have found that remote tellers were rarely used. We will not have remote tellers in our new digital branches," she says, adding: "We wanted to understand how people would react to this kind of banking. This experiment has yielded very good feedback on what customers are expecting from future banking services."

Mobile banking was next on her agenda, where non-banking players such as Paytm were making inroads, especially in bill payments, e-commerce transactions and money transfers. Within six months in office, Bhattacharya had come up with the 'State Bank Anywhere' app for smartphone users. Subsequently, SBI saw 7.71 crore transactions worth Rs 11,662 crore on the platform in just one year to emerge as the market leader in the mobile banking space. The bank has 1.35 crore users and a market share of 46 per cent in mobile banking transactions. The app was followed up with a digital wallet Buddy, which is also available to non-banking customers in 13 different languages. This app allows users to load money via debit and credit cards or one's own bank account to shop, transfer or pay utility bills. Next on her agenda is another mobile wallet Batua, a feature phone version of Buddy for the masses. "Bhattacharya is not just catering to the digital banking needs of affluent smartphone users, but is also thinking about the underprivileged with the Batua offering," says Singh of Accenture Financial Services. She hasn't, however, restricted herself to retail customers. Corporate banking, which dominates the banks portfolio, has also seen a shift from the earlier enquiry module on mobile to putting an entire accounting module for corporate customers.

SBI is also working on the 'agile configuration' model. "This will allow us to do more plug-and-play. We will be faster in putting up changes in products without impacting the basic ways of operations," says Bhattacharya, who moves between half a dozen screens in a day, including tablets, handsets, desktops and the iPad. Partly, her tech-savviness has helped in kick starting many of the digital initiatives. What is more noteworthy is her ability to remain open to ideas. Says V Vaidyanathan, Chairman and Managing Director, Capital First: "Arundhati doesn't mince words. There is a lot of clarity in her thoughts." Many were surprised when she joined hands with Reliance Industries as a junior equity partner for floating a payments bank - a new category of banks for achieving financial inclusion objectives. Clearly, Bhattacharya's twin strategy - full-scale and payment banks - would help in fighting competition more efficiently.

Crackdown on NPAs

When Bhattacharya assumed the role of chairman, the bank's NPAs were swelling by the day because of reckless lending practices during the boom period and a sullied economic environment. The lax credit appraisal processes were also responsible. Gross NPAs had peaked last year with 4.95 per cent amounting to Rs 61,605 crore - an amount that could take care of Coal India's capex requirements for the next five years or Bharti's planned investments for over three years in improving voice and broadband quality. Bhattacharya fully understood that a bloating NPA book would not only restrict SBI's ability to lend, but also impact the profitability and capital.

In a massive exercise to put a check on the asset quality, she introduced a number of steps. It started from web-based tracking, installing early-warning signal systems, developing risk models and engaging outside turnaround specialists. In fact, Bhattacharya also didn't shy away from selling some of the bad loans to asset reconstruction companies (ARCs). In the largest ever sale in its history, SBI sold bad loans worth Rs 12,000 crore in 2014/15 to ARCs. Market observers were baffled when Bhattacharya even put fresh NPAs, such as Hotel Leela, on the block. "It was sold within three months of declaring it as an NPA," says a top bank official. Bhattacharya's message to free loaders was simple - come to the table to negotiate and pay back, or deal with recovery companies. She has been clinically addressing the problem areas in asset quality. The three big sectors contributing over 80 per cent to SBI's deteriorating asset quality are agriculture, SMEs and mid-level corporates, barring a few big players like Kingfisher.

'Arundhati does not mince words. There is a lot of clarity in her thoughts, SAYS V Vaidyanathan, Chairman and MD, Capital First.

In agriculture, the bank is tying up with large agro-based or dependent corporates for supply chain financing. "We have also created a hub-and-spoke model with business correspondents, additional collateralisation and sensitised all staff involved in agri-lending," says Bhattacharya, adding: "We are also ensuring business correspondent channels can also act as recovery agents." There has also been a complete overhaul of the way the SME business is being handled. The bank now insists staffers to go out in the market in search of good clients, tracks the number of calls, proposals and sanctions. "We have mobile tools to track all of this. Today, the person who brings the client is also the person who puts up the proposal and services the account," says Bhattacharya, who has brought in an element of ownership to contain future NPAs. In fact , the new tie-ups with e-commerce companies is also a step in the direction to mitigate risks by financing the supply chain of these retail giants. While Bhattacharya has managed to bring down the gross NPAs, the worrying issue is the large book of stressed assets at 8.43 per cent of the advances, which includes gross NPAs and restructured assets.

The Cost Factor

In a highly competitive banking landscape, where asset-light payments and small finance banks would give traditional banks a run for their money, Bhattacharya has set in motion a very deep cost exercise across the board. For example, she has placed a large cash handling machine in Patna, where there will be no manual intervention. This new machine instantly sorts out soiled and mutilated notes, counterfeit currency and ATM fits notes. "We are testing this machine to see whether it brings down the cost and, if it does, we will replicate it across the country," she says. The bank has also put a centralised rent module which signals when to negotiate on rent for its branches so that the bank is not held to ransom at the last minute. "We have carried out a space audit as well as energy audit," she adds. Simultaneously, the bank is looking at ways and means to reduce travel and stationery costs. Bhattacharya says SBI has also centralised the back office of foreign operations into India wherever possible. "This has brought down the number of back office personnel in foreign offices. These people have been redeployed in sales and service areas."

MILESTONES

2013

Nov'13: Debuts on social media site Facebook. Now, 3.9 million followersApril'14: Relaunches twitter handle, fan following of 324,000

July'14: Flags off half a dozen fully digital branches in metros, 250 more by March 2016

2015

May'15: Takes equity share in new banking platform, Payment Bank, by tying up with Reliance Industries

May'15: Ties up with e-commerece giant Amazon to help customers and small businessesJuly'15: Launches SBI Foundation for CSR activities

As a result, the cost-to-income ratio has come down from 0.53 in 2013/14 to 0.50 in 2014/15. Analysts also agree that the bank's operating costs are under control. "We expect the cost-to-income ratio to decline to below 0.50 in the current year," says a recent report by Phillip Capital, a capital market firm. As the bank steps on the gas for its digitisation, the workforce would surely shrink as half of them are clerks deployed in the branches.

The Way Forward

Sceptics say the success of SBI's digitisation strategy has a lot to do with its retail book, which is just one-fifth of the total advances. In comparison to large private banks, such as ICICI, HDFC and Axis, SBI is largely a corporate bank. In fact, the maximum NPAs have also come from the corporate book. In the retail portfolio, over two-thirds of the bank's portfolio is locked in home and auto loans. The bank has 65 per cent of its branches in rural and semi-urban areas, where the potential to get into retail loans is higher, especially tractor, crop, two-wheeler and consumer durable loans, and Kisan credit card. Clearly, the immediate fortune of the bank is linked to corporate loans, which is already over-leveraged. "We are seeing some traction in the renewable, roads and mines sectors," says Bhattacharya.

Going ahead, the challenging economic environment cycle will surely change and many of her qualitative changes are sure to yield results. Bhattacharya, who started out at 22 and is due to retire next year, is leaving her imprints in making the 209-year-old bank much more nimble footed. "You have to be very open to new ideas. In today's age, change is very swift. So, if you have to evolve, you have to accept new ideas and new ways of doing thing. You should flow like water," Bhattacharya signs off.